How Gas Prices Affect the Economy

 How Gas Prices Affect the Economy

Nicholas Dettlaff

In the midst of a worldwide pandemic, not everything was dark and gloomy. Although the economy was hit hard and businesses all around were struggling, us daily drivers weren’t in that bad of a situation. All due to the gas prices that fell down to just under a dollar per gallon. Recently, that hasn’t been the case. With gas prices more than tripling we were dealt a worse hand than even before the pandemic. From your average spectator's eye, gas prices are fluctuating, and you would be correct, but what is the real impact in these rising gas prices? And why are they rising?

When people are asked what caused the prices to skyrocket, they immediately blame Joe Biden. Which isn’t entirely correct. Don’t get me wrong, with the election of our new president he is certainly at fault for a large portion of it. Biden and his administration have restricted the supply of domestic purchasable oil and pressured banks and asset managers to deprive themselves from traditional energy projects. On top of that, restricting America’s ability to produce its own oil instead of relying on other foreign drilling practices. As well as cutting off American supplies of oil by canceling the Keystone pipeline and limiting a large portion of our domestic drilling. subsequently removing nearly 11,000 people from work from the pipeline alone. Relying on the supply of foreign oil has caused prices to increase exponentially since the local supply has been restricted, therefore the demand increases.

Although the source of the prices aren’t entirely political, On top of our president's decisions, it’s monetary pressure on oil companies from financial losses that have almost forced them to switch things up. Since the pandemic, investments in the oil industry have dropped over 25%, allowing no room for breathing for these companies. For an industry that has lost 90% of its stock value since 2012, these rising costs were kind of a no brainer.

What are the effects of higher gas prices?

When gas prices rise, the general public's confidence in buying other retail products plummets, as their consumer confidence is spent a large portion on gas. Higher prices of gas may also apply to less people driving in general. While consumers tend to drive less, they resort to online shopping and shipping. Although shipping costs rise as the seller has to pay for gas at the same time. could cost more as gas prices rise. This is especially true for products, or components for products, that are manufactured overseas. “Likewise, many products that contain plastics or synthetic materials are based in part on petroleum and refining. Higher oil prices mean higher prices for these materials too.” According to investopedia.